Kelly Found Liable for Fraud

In a Feb. 5 decision in Valley County District Court, Judge Yvonne Laird ordered Patrick Kelly, formerly of St Marie and President of the Saint Marie Development Corporation (SMDC), to pay to New St. Marie, LLC, owner Michael Mitchell a total of $12,518,734.60 for damages, interests and payments made for being found liable of fraud and breach of contract. Kelly had countersued Mitchell, but the Judge denied each of Kelly’s claims.

According to Court papers Kelly had served on SMDC’s board of directors since its inception in 2002, following bankruptcy proceedings of a business in which Kelly had a secured interest. As a result he became the larger shareholder in SMDC alongside others with interest in the previous company. At first, SMDC was intended to liquidate the company's assets, and pay out debts to the shareholders over a three year period. In 2011, however, according to court records, Kelly took over SMDC, and had “drove other board members away.” As a result Kelly was able to trade properties for his own benefit. Court records state, “Kelly treated the assets of SMDC as if the assets were his own personal assets.”

Court filings show that by 2012 SMDC had racked up significant tax liens, and as a result Kelly sought a loan from Rod Haynes at Creative Finance and investments who advised Kelly that he should seek investors. Haynes referred Kelly to Mitchell who was a “commodities trader”, who in his testimony said he had leveraged a $70,000 home equity loan into a $28 million enterprise over the course of his work.

Mitchell invested $400,000 in paying off tax liens and in return Kelly was supposed to transfer his personal property and stock in SMDC into a “joint venture.” According to the court decision Kelly never acted on the contract putting him in breach. Documents also assert he had misrepresented material facts to Mitchell. Those misrepresentations dealt primarily with his right to pledge SMDC’s assets, his shareholder worth in SMDC, and the fact that he was owed back pay by SMDC. Mitchell relied heavily on Kelly’s assertions in making his investment.

After years of trying to make the agreement work Mitchell finally sued Kelly for fraud and breach of contract of which Judge Laird found him liable for over $12 million.

Attorney Reid Perkins with the law firm Worden Thane, P.C., representing Mitchell, told the Courier, “Mike’s goal is to rehab and revitalize the community.” He went on to speculate about Mitchell’s intentions for possible redevelopment plans if the properties end up with hm when all is said and done.

Kelly, who contacted the Courier on Feb. 19 from his new residence in Helena, said, “I’m going to appeal.” He described the court’s findings as “crazy.” He could not be reached for further comment at press time.